‘Real News’: Have Democrats Already Won the War on the Welfare State and Government Spending?

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Ezra Klein has an eyebrow raising piece on Bloomberg View this week where he argues–despite today’s conventional wisdom of complete divide–that Democrats and Republicans have come to a consensus for the moment on certain issues.

Republicans swear to protect Medicare and Social Security, and most recognize they can no longer hope to repeal Barack Obama’s Affordable Care Act. Democrats voted to make the George W. Bush tax rates permanent for almost all Americans.

This is not a stable peace. The Democrats have mostly won the debate over what the government should do, while the Republicans have mostly won the debate over how much the government should tax. Sadly, the two sides of that equation don’t come anywhere near to adding up. The war currently raging from cliff to cliff is about bringing taxation and commitments closer to alignment.

Klein predicts that the latest debt ceiling fight will fall in the Democrats’ favor with Republicans eventually folding on cutting more government benefits. On a broader scale, the fight over the welfare state is all but over and politics moving forward will focus on how to best implement this expansion of government–according to Klein.

So while the debate over the size of the welfare state is mostly concluded, the debate over its increasing sprawl is more necessary than ever. If we’re going to do so much — and we are — we should learn to do it well

What will become of us? Nothing good if this(spending) continues. The mechanism of financial ruin will be a collapse in the value of the dollar, perhaps occasioned by a return of the rate of interest the government pays on its debt to a normal level. Currently, due to the unique circumstances of the slow growth world economy, the continued safe haven status of the U.S., and the Fed’s quantitative easing, interest rates are at the abnormally low level of about 1.8% on the total federal debt. Every 1% increase in the interest rate the federal government pays on its debt would add $125 billion to the budget. An increase of 500 basis points, which would be large but not unprecedented, would add about $600 billion to federal expenditures simply to service the debt. That could push the deficit to $2 trillion a year.

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This budget battle is a turning point for republican government as significant as Caesar crossing the Rubicon and ending the Roman Republic. Or, as Lincoln put it, determining whether “government of the people, by the people, for the people shall not perish from the earth.”

What is the real debate ahead for American politics? How to implement big government moving forward according to Klein, or finding a consensus on real fiscal restraint as called for by Richards? Is the era of entitlement over? Watch the ‘Real News’ team debate this all below: